Between today and the year 2030, the digital revolution will profoundly change how small business owners in South Africa operate, attract funding, grow their businesses and change our economic landscape.
Our economy is changing lightning-fast, with technology being the single biggest catalyst. Between now and 2030, robotics, artificial intelligence, Blockchain and other innovative solutions will become even more prevalent than they already are, allowing the private sector to operate more efficiently.
The growing contingent of more confident start-ups will change the face of our economy between now and 2030, for starters because they are more in tune with what their customers need, particularly compared to large corporate dinosaurs.
Despite a dozen different government-led SME funds and financing schemes, the 2018/2019 Assessment of South Africa’s SME Landscape report shows that over half of SMEs in this country die before their third birthday. Funding issues top the list of challenges.
This may become a thing of the past as we approach 2030 thanks to a growing community of alternative lenders and fintech companies that take a different approach to risk. To companies like ours, an applicant’s financial records and business performance are what really matters when applying for working capital – not his or her collateral or assets.
In addition, by doing things differently, fintech lenders are forcing the banks and other conventional lenders to reinvent themselves if they want to stay relevant to a growing pool of potential clients, namely SMEs.
There is, unfortunately, one more pressing issue that needs to be addressed over and above the funding issue. Besides struggling to access finance, South African SMEs are faced by clients who are failing to pay them within the legally prescribed time frame of 30 days.
In March last year, the government was sitting on R27billion worth of outstanding SME invoices, the SBI reported. This is what corruption costs South Africa every year. The private sector isn’t much better. The SBI has recently found that just a mere fraction of the JSE’s top 100 companies are paying their smaller service providers within the prescribed 30 days.
Karl Westvig is the chief executive of Retail Capital.